Is It Better to Lease or Buy a New Car for your business?
When it comes to getting a new car, one of the biggest decisions drivers face is whether to lease or buy.
There’s no one-size-fits-all answer — the right choice depends on how you use the car, your finances, and how much flexibility you want.
Here we try and give you an overview so you can make the right decision for you.
Leasing a Car for Your Business
Leasing allows your business to use a vehicle for a fixed period (usually two to five years) in exchange for regular monthly payments. At the end of the lease, the car is returned rather than owned.
Advantages of Leasing
Lower upfront costs
Leasing typically requires a much smaller initial outlay compared to buying. This is particularly attractive for SMEs that want to preserve working capital or avoid tying up cash in assets.
Predictable monthly payments
Fixed monthly payments make budgeting easier and help maintain steady cash flow. Many lease agreements can also include maintenance, reducing unexpected costs.
Access to newer, more efficient vehicles
Leasing makes it easier to upgrade to newer models with better fuel efficiency, lower emissions, and improved safety features. This can be beneficial for both operating costs and company image.
Tax efficiency
Lease payments are usually treated as an allowable business expense, meaning they can often be deducted when calculating taxable profits.
VAT advantages
For VAT-registered businesses, up to 50% of the VAT on lease payments can often be reclaimed if the car is used for both business and personal purposes (and up to 100% if it’s used exclusively for business).
Protection from excess depreciation — especially for EVs
One of the biggest advantages of leasing, particularly for electric vehicles, is protection from unexpected or accelerated depreciation. The EV market is evolving rapidly, with frequent changes in technology, government incentives, charging infrastructure, and manufacturer pricing. These factors can significantly impact resale values.
By leasing an EV, your business avoids the risk of owning a vehicle that depreciates faster than expected. Instead, depreciation is effectively built into the lease agreement, providing cost certainty and peace of mind. At the end of the lease, you simply return the vehicle, rather than worrying about its market value.
Disadvantages of Leasing
No ownership
At the end of the lease, you don’t own the vehicle. This means there’s no asset to sell or retain once payments stop.
Mileage restrictions
Most leases come with agreed mileage limits. Exceeding these limits can result in additional charges, which need to be considered if your business travel is unpredictable.
Condition requirements
Vehicles must be returned in good condition. Excess wear and tear may lead to end-of-contract charges.
However, for most UK business leases, fair wear and tear standards are governed by the BVRLA (British Vehicle Rental and Leasing Association), which provides clear guidelines to ensure customers are treated fairly and consistently when vehicles are returned.
Buying a Car Outright
Buying a vehicle outright means your business owns the car from day one, whether it’s paid for in cash or via finance that leads to ownership.
Advantages of Buying
Full ownership
Once purchased, the vehicle belongs to your business. You’re free to keep it as long as you like, modify it if necessary, and use it without contractual restrictions.
No mileage limits
Unlike leasing, there are no penalties for high mileage, making buying a good option for businesses with heavy or unpredictable vehicle use.
Capital allowances
Depending on the car’s emissions and classification, your business may be able to claim capital allowances, which can reduce taxable profits over time.
Resale value
When you no longer need the vehicle, you can sell it and recover some of the original cost, which can help offset depreciation.
Disadvantages of Buying
Higher upfront cost
Purchasing outright requires a significant initial investment, which can impact cash flow—especially for smaller businesses.
Depreciation risk
Cars lose value over time, and depreciation can be steep in the early years. This risk is particularly relevant for electric vehicles, where rapid technological advances and market changes can affect resale values.
Maintenance responsibility
All servicing, repairs, and unexpected maintenance costs fall to you, which can make expenses less predictable.
Which Option Is Best for Your Business?
In general:
- Leasing is often better for businesses that prioritise cash flow, flexibility, and cost certainty, particularly when adopting electric vehicles.
- Buying tends to suit businesses that plan to keep vehicles long term, have high mileage needs, and are comfortable managing depreciation and maintenance.
It’s also worth considering emissions (especially Benefit-in-Kind implications), how the vehicle will be used, and your business’s current tax position.
Confused about which is best.
Ready to find the right vehicle solution for your business?
Whether you’re considering leasing or buying — including switching to an electric vehicle — expert advice can make all the difference.
Get in touch with our team today for a no-obligation consultation. We’ll help you assess your business needs, manage costs, and choose a vehicle solution that works for you now and in the long term.